Task Description:
Cleaning Maids Limited (“Maids”) is a large Australian company listed on the Australian Stock Exchange (ASX). Maids has an annual turnover in excess of 200 million Australian dollars.
Maids provides cleaning services to commercial enterprises and also has a retail business selling cleaning products to the general public via an online store, Cleaning Maids Retail Pty Ltd, a wholly owned subsidiary of Maids.
Mary Lou Francis is the Managing Director of the company and a significant 25% shareholder. Jason Ahmed is the Chief Executive Officer and shareholder. He is not a director. Shelia Spade is a well-known Australian social media influencer. Shelia is a non-executive director of the company. Shelia has no tertiary education qualifications and no real interest in the company other than receipt of her directors’ fees of $100,000 per year, which she receives regardless of whether or not she attends the 10 directors’ meetings. She is however required to attend the annual general meeting. There are 10 other directors of the company.
Maids’ sponsors people to come to Australia as employees, the terms of the sponsorship are:
- Maids will pay economy class one-way airfares to Australia.
- The employee will give their passport to Maids Chief Executive Officer on their arrival for safekeeping.
- Maids will pay the employee a wage of $10 per hour.
- The employee agrees to work for 50 hours per week and any additional overtime required by Maids, no penalty rates will be payable to the employee by Maids.
- Maids will provide accommodation and food for the employee valued at $200 per week which will be deducted from the employee’s gross salary.
- The employee will pay Maids 50% of their weekly wage after deduction for food and accommodation for a period of twelve months as reimbursement for travel and other costs incurred by Maids in obtaining a passport and visa to enter Australia.
- The employee is not required to obtain an Australian Tax File Number as the employer has a special exemption from the Australian Taxation Office.
Maids is a majority shareholder in a company incorporated in Vietnam “Cleaning Vietnam Pty Ltd” which manufactures cleaning suppliers and equipment. In a recent audit of the Vietnamese company, it was found that 30% of the employees of the company were children under the age of 10 years. The Vietnamese government is prosecuting the company for breach of labour laws. In June 2023 the board of directors of Maids passed a resolution unanimously accepting the Modern Slavery Statement prepared for lodgement pursuant to the Modern Slavery Act 2018 (Cth) the report made two important statements:
- all Australian employed staff are paid award wages, Maids always complies with award provisions for employees.
- The supply chain used by Maids has not and would not engage in and or condone the employment of child labour.
The report was prepared by Jason Ahmed who strongly recommended to the Directors that they pass the resolution and lodge the Modern Slavery Statement. The Directors always accept recommendations of Mr Ahmed as he runs the company and is a shareholder.
Shelia attended the meeting. She had not read the papers prepared for the directors prior to the meeting. It is her belief that as a non- executive director she can always rely on recommendations made by Mr Ahmed.
Question.
You are an employed solicitor with The Anti-Slavery Coalition of Australia (Anti- Slavery) you have been asked to research the following questions and advise your client:
- Have the directors Mary-Lou and Shelia breached any of their directors’ duties by accepting and signing the Modern Slavery statement?
Consider only Mary-Lou and Shelia for this question. (10 Marks)
- Does Jason Ahmed, the Chief Executive Officer of the company, have any duties to the company other than his duty as an employee? (5 Marks)
- Do the directors of Maids have a duty to the Australian community pursuant to either the common law, equity or the Corporations Act 2001 (Cth) not to engage in modern slavery practices. Do not consider the criminal law or any penalties available under the Modern Slavery Act 2018 (Cth). (8 Marks)
- Conclusion (2 Marks)
Answer:
1. Introduction
The acceptance of slavery has been changing in modern organisations and contemporary organisations are embracing slavery in changing formats. Here, this essay focuses on the case of Cleaning Maids Limited, an organisation listed on the Australian Stock Exchange, it’s dealing with the Modern Slavery statement and the responsibility of the CEO and the directors of the company. The duties of the director to pass the resolution of modern slavery and lodge the modern slavery statement in the organisation are analysed here
2. Breaching the director’s duties
2.1.Issue
The issue is about whether the directors Mary-Lou and Shelia breached any of their directors’ duties by accepting and signing the Modern Slavery statement. By analysing the duty of the directors of the ASX-listed companies according to the Corporations Act 2001 (Cth) in Australia, it can be said that the directors are responsible for using their powers and discharging their duties in good faith to raise the best introduced of the company and have a proper purpose (Harris, 2012). From this point of view, the directors of the organisation Mary-Lou and Shelia must be eligible to attend the meeting and read the papers prepared by the directors prior to the meeting to find out whether there are any disputes regarding modern slavery practice in the organisation and the organisation is not doing any unethical practices of forced labour.
2.2.Rule
According to the Modern Slavery Act 2018 (Cth), larger organisations mass report that they are preventing and addressing any kind of slavery risk in their operation as well as in their supply chain. Cleaning Maids Limited thus is responsible for ensuring that no kind of slavery practice is there in the operation and supply chain of the organisation and the directors and CEO of the organisation (Du Plessis, 2016). However, from the information gathered from the case study, it is found that the directors Mary-Lou and Shelia took part in the meeting, however, they did not read the papers prepared for the directors and relied on the recommendations made by Mr Ahmed.
2.3.Application
Joint statements could have been applied in this case as the director’s duo of the company, Mary-Lou and Shelia responsible for providing the fact that the organisation is not practising any kind of slavery in their supply chain as well as in their operation. However, according to the organisation’s practice, the employees are responsible for providing their passports to the company’s CEO on their arrival for safekeeping, which is not the standard practice and can be considered an act of slavery (Terry & Giugni, 2003).
2.4.Conclusion
From the perspectives of the directors, Mary-Lou and Shelia have not breached any of their directors’ duties by accepting and signing the Modern Slavery statement. However, it was essential that they should have provided a joint or individual statement that they have laid and accepted the fact that was included in the report and the organisation is compromising with any slavery-related practice in the operation or their supply chain activities
3. Duties of the CEO to the company other than his duty as an employee
3.1.Issue
Section 683-1(3) of the CATSI Act says that the CEO of the organisation is the individual who should be included in the decision-making that affects the business of the organisation and he should have the capacity to affect the financial standing of the organisation significantly. Unlike the other employees of the organisation that see of the organisation is responsible for setting the overall direction of the business and managing the operation and resources of the organisation (Redmond, 2012). However, it is also necessary that the CEO of the organisation should have the capacity to make decisions as per the provided by the director of the organisation. In this case, Mary-Lou and Shelia are the directors who should have the ability to direct the resolution and lodge the Modern Slavery Statement. On the contrary, Jason Ahmed prepared the report on behalf of the directors Mary-Lou and Shelia and recommended that they pass the resolution and lodge the Modern Slavery Statement.
3.2.Rule
According to the rule, that is the responsibility of the directors to pass the resolution and lodge the slavery statement on behalf of the organisation and ensure that all aspects of the Modern Slavery Act 2018 (Cth) have been maintained by the organisation to a great extent (Sales, (2020). However, it has been identified from the analysis that the supply chain used by the organisation has not and would not engage or condone the employment of child labour which is not true and the directors of the organisation should have awareness regarding that rather than rely on the report prepared by the CEO of the organisation. The CEO of the organisation should work according to the rules said by the directors which has not been followed in this particular case.
3.3.Application
There are differences of duties between an employee and the CEO of the organisation such as the responsibility for risk-taking as well as their opinion related to decision-making. However, in this particular case, Jason Ahmed, the Chief Executive Officer of the company, has been taking major responsibility for preparing the report of the organisation regarding the resolution and lodging the Modern Slavery Statement as he is one of the major shareholders of the organisation. From this point of view, his recommendation is being accepted.
3.4.Conclusion
From the perspective of a CEO, the CEO of the organisation must set the direction of the business and manage the resources and operation of the organisation. However, it is also required that the CEO should not become the governing body of the organisation who should take all the directions on behalf of the directors which has been identified in this case. As he is an employee of the organisation hired by the directors, he should maintain those protocols and decorum in the organisation in terms of providing specific responsibilities to the employees.
4. Directors of Maids have a duty to the Australian community
4.1.Issue
The major issue in the case of the Miad organisation is that the directors are not very focused on complying with the community corporation law. One non-executive director is aloof from the situation and she only listens to active directors and takes her yearly remuneration (Quinn, 2019). The issue has been complex as it is seen that the child labour issues have been breached by the company and active workers of age 10 years participated in the program in Vietnam supply chain. Thus, a direct breach of compliance with the Corporation Act was executed. Another issue is that a 50 % reduction in food and lodging is performed and a slavery document has not been signed and enacted properly in the company (legislation.gov.au. (2024). These are the major issues and these issues should be addressed by the Maid as they have a responsibility towards the Australian community.
4.2.Rule
It can be seen that according to the Corporation Act of 2001 in Australia, equality in the case of labour management is a very important aspect that has to be followed by organisations to comply with the law. The Corporation Act of 2001 depicts that Care and diligence are one of the major rules that have to be used by the officers in power to save the Australian community from any social exploitation. In the case of the Maid, there has been an occurrence of Child labourers who were under 10 years old (classic.austlii.edu.au, 2024). Moreover, Immigration aspects have to be effectively managed in the law. The rule in the law also depicts that business judgment has to be made in proper faith and according to the law for the greater good of the company and the workers as well. In the rule, it is mentioned that no material or personal interest and gain can be made in the case of a business judgment of a corporation. Thus, the application of the law has to be considered for effective duty for the Australian community by the Maid organisation.
4.3.Application
The Application of the Corporation Act 2001 and the modern anti-slavery document will be crucial for Maid organisation. It can be witnessed that the CEO and the board of directors should lead proactively and implement the action plan of the no slavery document (Herzberg & Lipton, 1999). Any kind of child labour should be prohibited and the supply chain aspects have to be monitored effectively. If the suppliers use child labour that is directly impacting the law of the company and that has to be kept in mind. Thus, according to the act the background verification of the organisations has to be performed most effectively.
4.4.Conclusion
The Corporation Act of 2001 with anti-slavery documents has to be managed effectively by the maid organisation based on hardcore compliance with the law. Background monitoring of every supply chain company has to be considered. The law enforcement is based on effective monitoring of the corporation act in the company. Moreover, the policy regarding zero tolerance to child labour should help in increasing responsibility towards the community by the organisations.
5. Conclusion of the study
To conclude the study, it can be stated that from the study it has been identified that there are specific differences between the directors making decisions on behalf of the organisation and the employees such as the CEO of the organisation deciding on behalf of the organisation. It is the responsibility of the CEO that he should follow the directions given by the directors so that no breach of responsibilities of the directors and the CEO can be identified and affect the entire decision-making in the organisation
References
Classic.austlii.edu.au. (2024). Corporations Act 2001 – sect 180 care and diligence–civil obligation only. https://classic.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s180.html
Du Plessis, J. (2016). Corporate governance, corporate responsibility, and law: Disclosure of non-financial information: A powerful corporate governance tool. Corporate Responsibility and Law: Disclosure of Non-financial Information: A Powerful Corporate Governance Tool, 34, 16-14.
Harris, J. (2012). Company law: theories, principles and applications. LexisNexis Butterworths.
Herzberg, A., & Lipton, P. (1999). Understanding Company Law. LBC Information Services.
legislation.gov.au. (2024). Corporations Act 2001. Australian Government Coat of Arms. https://www.legislation.gov.au/C2004A00818/2021-10-05/text
Quinn, J. (2019). The sustainable corporate objective: Rethinking directors’ duties. Sustainability, 11(23), 6734. https://www.mdpi.com/2071-1050/11/23/6734
Redmond, P. (2012). Directors’ duties and corporate social responsiveness. UNSWLJ, 35, 317. https://opus.lib.uts.edu.au/bitstream/10453/18994/1/2011006417.pdf
Sales, P. (2020). Directors’ duties in a post-Hayne world: “The Company” is more than the sum of its shareholders. Australian Law Journal, 94(12), 936-948.
Terry, A. L., & Giugni, D. (2003). Business, Society and the Law. Thomson Learning.